G.R. No.

177181
sc.judiciary.gov.ph /jurisprudence/2009/july2009/177181.htm

THIRD DIVISION

RABAJA RANCH DEVELOPMENT CORPORATION,

Petitioner, Present:

YNARES-SANTIAGO, J.,

Chairperson,

CORONA,

- versus - CHICO-NAZARIO,

VELASCO, JR., and

NACHURA, JJ

AFP RETIREMENT AND

SEPARATION BENEFITS SYSTEM, Promulgated:

Respondent.

July 7, 2009

x-------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, seeking the
reversal of the Court of Appeals (CA) Decision dated June 29, 2006, which reversed and set aside the Decision of
the Regional Trial Court (RTC) of Pinamalayan, Oriental Mindoro, Branch 41,dated June 3, 2004.

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 The Facts

Petitioner Rabaja Ranch Development Corporation (petitioner), a domestic corporation, is a holder of Transfer
Certificate of Title (TCT) No. T-88513 covering the subject property particularly identified as Lot 395, Pls 47, with an
area of 211,372 square meters more or less, and located at Barangay (Brgy.) Conrazon, Bansud, Bongabon,
Oriental Mindoro (subject property).

Respondent Armed Forces of the Philippines Retirement and Separation Benefits System (AFP-RSBS) is a
government corporation, which manages the pension fund of the Armed Forces of the Philippines (AFP), and is duly
organized under Presidential Decree (P.D.) No. 361, as amended by P.D. No. 1656 (respondent). Respondent is a
holder of TCT No. T-51382 covering the same subject property.

On September 1, 1998, petitioner filed a Complaint for Quieting of Title and/or Removal of Cloud from Title before the
RTC. Trial on the merits ensued.

Petitioner averred that on September 6, 1955, Free Patent No. V-19535 (Free Patent) was issued in the name of
Jose Castromero (Jose). On June 1, 1982, the Free Patent was registered, and Original Certificate of Title (OCT)
No. P-2612 covering the subject property was issued in the name of Jose. Sometime in the first half of 1982, Jose
sold the subject property to Spouses Sigfriedo and Josephine Veloso (spouses Veloso), and TCT No. T-17104 was
issued in favor of the latter. Spouses Veloso, in turn, sold the subject property to petitioner for the sum of
P634,116.00 on January 17, 1997, and TCT No. T-88513 was issued in petitioners name. Petitioner alleged that it
was the lawful owner and possessor of the subject property.

Traversing the complaint, respondent, in its Answer, claimed that its title over the subject property was protected by
the Torrens system, as it was a buyer in good faith and for value; and that it had been in continuous possession of
the subject property since November 1989, way ahead of petitioner's alleged possession in February 1997.

Respondent stated that on April 30, 1966, Homestead Patent No. 113074 (Homestead Patent) was issued in the
name of Charles Soguilon (Charles). On May 27, 1966, the Homestead Patent was registered and OCT No. RP-110
(P-6339) was issued in Charles's name, covering the same property. On October 18, 1982, Charles sold the subject
property to JMC Farm Incorporated (JMC), which was then issued TCT No. 18529. On August 30, 1985, JMC
obtained a loan from respondent in the amount of P7,000,000.00, with real estate mortgage over several parcels of
land including the subject property. JMC failed to pay; hence, after extra-judicial foreclosure and public sale,
respondent, being the highest bidder, acquired the subject property and was issued TCT No. T-51382 in its name.
Respondent contended that from the time it was issued a title, it took possession of the subject property until
petitioner disturbed respondent's possession thereof sometime in 1997. Thus, respondent sent petitioner a Demand
Letter asking the latter to vacate the subject property. Petitioner replied that it was not aware of respondent's claim.
Presently, the subject property is in the possession of the petitioner.

The RTC's Ruling

On June 3, 2004, the RTC ruled in favor of the petitioner on the ground that petitioner's title emanated from a title
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older than that of the respondent. Moreover, the RTC held that there were substantial and numerous infirmities in
the Homestead Patent of Charles. The RTC found that there was no record in the Bureau of Lands that Charles was
a homestead applicant or a grantee of Homestead Patent No. 113074. Upon inquiry, the RTC also found that a
similar Homestead Patent bearing No. V-113074 was actually issued in favor of one Mariano Costales over a parcel
of land with an area of 8.7171 hectares and located in Bunawan, Agusan in Mindanao, per Certification issued by
the Lands Management Bureau dated February 18, 1998. Thus, the RTC held that Charles's Homestead Patent was
fraudulent and spurious, and respondent could not invoke the protection of the Torrens system, because the system
does not protect one who committed fraud or misrepresentation and holds title in bad faith. The RTC disposed of the
case in this wise:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiff and against the defendant,
as follows:

1. DECLARING as valid OCT No. P-2612, in the name of Jose Castromero, and the subsequent TCT No. T-17104
in the name of the spouses, Siegfriedo A. Veloso and Josephine Sison Veloso and TCT No. T-88513, in the name of
plaintiff Rabaja Ranch & Development Corporation;

2. DECLARING plaintiff as the true and lawful owner of the lot in question covered by TCT No. T-88513;

3. DECLARING as null and void OCT No. RP-110 (P-6339), in the name of Charles Soguilon and its derivative titles,
TCT No. T- 18529 registered in the name of J.M.C. Farm Incorporated and TCT No. T-51392, in the name of the
defendant AFP Retirement Separation and Benefits System;

4. DIRECTING the Register of Deeds, City of Calapan, Oriental Mindoro, to cancel TCT No. T-51392, in the name of
defendant AFP Retirement Separation & Benefits System and its registration from the Records of the Registry of
Deeds;

5. NO PRONOUNCEMENT as to damages and attorney's fees for plaintiff and defendant's counterclaim is hereby
dismissed. No Cost.

SO ORDERED.

Aggrieved, respondent appealed to the CA.

The CA's Ruling

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On June 29, 2006, the CA reversed and set aside the RTC's Decision upon the finding that Charles's Homestead
Patent was earlier registered than Jose's Free Patent. The CA held that Jose slept on his rights, and thus,
respondent had a better right over the subject property. Further, the CA opined that while it is interesting to note that
petitioner's claim that Homestead Patent No. V-113074 was issued to Mariano Costales, per Certification issued by
the Lands Management Bureau, there is nothing on record which would show that said Homestead Patent No. V-
113074 and Homestead Patent No. 113074 granted to Charles were one and the same.

Petitioner filed a Motion for Reconsideration, which the CA, however, denied in its Resolution dated March 26, 2007.

The Issues

Hence, this Petition based on the following grounds:

a) The CA decided a question of substance not in accordance with existing law and jurisprudence.

b) The CA Decision was based on a gross misapprehension or non-apprehension of facts.

Petitioner asseverates that Homestead Patent No. 113074 is not found in the files of the Land Management Bureau,
nor does Charles's name appear as an applicant or a patentee; that, similarly, Homestead Patent No. V-113074 was
actually issued to Mariano Costales over a parcel of land in Mindanao and not in Mindoro; that, being fake and
spurious, Charles's Homestead Patent is void ab initio and, as such, does not produce or transmit any right; that the
CA completely ignored the RTC's factual findings based on documentary and testimonial evidence, particularly of the
invalidity and infirmities of the Homestead Patent; that said Homestead Patent does not legally exist, hence, is not
registrable; that respondent's assertion -- that since the issuance of the Homestead Patent in 1966, records and
documents have not been properly kept -- should be discarded, as petitioner's Free Patent which was issued way
back in 1955 is still intact and is of record; that a Homestead Patent, being a contract between the Government and
the grantee, must bear the consent of the Government; and, Charles's Homestead Patent being a simulation, cannot
transmit any right; that the earlier registration of the Homestead Patent has no legal effect, as the same is merely
simulated; and that OCT No. No. RP-110 (P-6339) and all derivative titles issued, including respondent's title, are
null and void.
Petitioner submits that it has a better right over the subject property than respondent.

Respondent takes issue with petitioners claim that the Homestead Patent is spurious or fake, the same being a
question of fact not proper in a petition for review on certiorari before this Court. Respondent also posits that the
factual findings of the CA are conclusive and binding on this Court, as such findings are based on record; that
respondent has a better right over the subject property because only the certified copy and not the original copy of
the Free Patent was transcribed and registered with the Register of Deeds of Calapan, Oriental Mindoro; that the
Homestead Patent was duly transcribed on May 27, 1966, way ahead of the registration of the Free Patent on June
1, 1982; that the CA was correct in ruling that Section 122 of Act No. 496 (The Land Registration Act) as amended
by Section 103 of P.D. No. 1529 (The Property Registration Decree) provides that registration of the Patent with the
Register of Deeds is the operative act to affect and convey the land; and that the fact that the Homestead Patent was
duly registered, said Patent became indefeasible as a Torrens Title. Moreover, respondent avers that the petitioner
failed to prove by preponderance of evidence that the Homestead Patent is spurious or fake. Respondent maintains
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that it is the Free Patent which is spurious since what was registered was only the certified and not the original copy
of the Free Patent.

The issues may, thus, be summed up in the sole question of

WHETHER OR NOT RESPONDENT'S TITLE WHICH ORIGINATED FROM A FAKE AND SPURIOUS
HOMESTEAD PATENT, IS SUPERIOR TO PETITIONER'S TITLE WHICH ORIGINATED FROM A VALID AND
EXISTING FREE PATENT.

Simply put, the issue is who, between the petitioner and respondent, has a better right over the subject property.

Our Ruling

The instant Petition is bereft of merit.

While this Court, is not a trier of facts and is not required to examine or contrast the oral and documentary evidence
de novo, nonetheless, it may review and, in proper cases, reverse the factual findings of lower courts when the
findings of fact of the trial court are in conflict with those of the appellate court.In this case, we see the need to
review the records.

The special circumstances attending this case cannot be disregarded. Two certificates of title were issued covering
the very same property, deriving their respective authorities from two different special patents granted by the
Government. The Free Patent was issued to Jose on September 6, 1955 as opposed to the Homestead Patent
which was issued to Charles on April 30, 1966. The latter was registered on May 27, 1966, ahead of the former
which was registered only on June 1, 1982. Each patent generated a certificate of title issued to a different set of
individuals. Over the years, the subject property was eventually sold to the contending parties herein, who both
appear to be buyers in good faith and for value.

Petitioner now seeks relief before this Court on the main contention that the registered Homestead Patent from
which respondent derived its title, is fake and spurious, and is, therefore, void ab initio because it was not issued, at
all, by the Government.

We are not convinced.

Our ruling in Republic v. Guerrero, is instructive:

Fraud is of two kinds: actual or constructive. Actual or positive fraud proceeds from an intentional deception

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practiced by means of the misrepresentation or concealment of a material fact. Constructive fraud is construed as a
fraud because of its detrimental effect upon public interests and public or private confidence, even though the act is
not done with an actual design to commit positive fraud or injury upon other persons.

Fraud may also be either extrinsic or intrinsic. Fraud is regarded as intrinsic where the fraudulent acts pertain to an
issue involved in the original action, or where the acts constituting the fraud were or could have been litigated
therein. The fraud is extrinsic if it is employed to deprive parties of their day in court and thus prevent them from
asserting their right to the property registered in the name of the applicant.

The distinctions assume significance because only actual and extrinsic fraud had been accepted and is
contemplated by the law as a ground to review or reopen a decree of registration. Thus, relief is granted to a
party deprived of his interest in land where the fraud consists in a deliberate misrepresentation that the lots are not
contested when in fact they are; or in willfully misrepresenting that there are no other claims; or in deliberately failing
to notify the party entitled to notice; or in inducing him not to oppose an application; or in misrepresenting about the
identity of the lot to the true owner by the applicant causing the former to withdraw his application. In all these
examples, the overriding consideration is that the fraudulent scheme of the prevailing litigant prevented a party from
having his day in court or from presenting his case. The fraud, therefore, is one that affects and goes into the
jurisdiction of the court.

We have repeatedly held that relief on the ground of fraud will not be granted where the alleged fraud goes into the
merits of the case, is intrinsic and not collateral, and has been controverted and decided. Thus, we have
underscored the denial of relief where it appears that the fraud consisted in the presentation at the trial of a
supposed forged document, or a false and perjured testimony, or in basing the judgment on a fraudulent
compromise agreement, or in the alleged fraudulent acts or omissions of the counsel which prevented the petitioner
from properly presenting the case.

No actual and extrinsic fraud existed in this case. In our jurisdiction, fraud is never presumed. Mere allegations of
fraud are not enough. Intentional acts to deceive and deprive another of his right, or in some manner, injure him must
be specifically alleged and proved. The burden of proof rests on petitioner, and the petitioner failed to discharge the
burden. Petitioner did not convincingly show that the Homestead Patent issued to Charles is indeed spurious. More
importantly, petitioner failed to prove that respondent took part in the alleged fraud which dated back as early as
1966 when Charles supposedly secured the fake and spurious Homestead Patent.

In Estate of the Late Jesus S. Yujuico v. Republic, citing Republic v. Court of Appeals , this Court stressed the fact
that it was never proven that private respondent St. Jude was a party to the fraud that led to the increase in the area
of the property after it was sub-divided. In the same case, citing Republic v. Umali, we held that, in a reversion case,
even if the original grantee of a patent and title has obtained the same through fraud, reversion will no longer
prosper as the land had become private land and the fraudulent acquisition cannot affect the titles of innocent
purchasers for value.

This conclusion rests very firmly on Section 32 of P.D. No. 1529, which states:

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SECTION 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be
reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor
by any proceeding in any court for reversing judgment, subject, however, to the right of any person, including the
government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or
confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and
review of the decree of registration not later than one year from and after the date of the entry of such decree of
registration, but in no case shall such petition be entertained by the court where an innocent purchaser for
value has acquired the land or an interest therein whose rights may be prejudiced. Whenever the phrase
"innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include
an innocent lessee, mortgagee, or other encumbrancer for value.

Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall
become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy
by action for damages against the applicant or any other person responsible for the fraud. (Underscoring ours)

Settled is the rule that no valid TCT can issue from a void TCT, unless an innocent purchaser for value had
intervened. An innocent purchaser for value is one who buys the property of another, without notice that some other
person has a right to or interest in the property, for which a full and fair price is paid by the buyer at the time of the
purchase or before receipt of any notice of the claims or interest of some other person in the property. The protection
given to innocent purchasers for value is necessary to uphold a certificate of title's efficacy and conclusiveness,
which the Torrens system ensures.

Clearly, respondent is an innocent purchaser in good faith and for value. Thus, as far as respondent is concerned,
TCT No. 18529, shown to it by JMC, was free from any flaw or defect that could give rise to any iota of doubt that it
was fake and spurious, or that it was derived from a fake or spurious Homestead Patent. Likewise, respondent was
not under any obligation to make an inquiry beyond the TCT itself when, significantly, a foreclosure sale was
conducted and respondent emerged as the highest bidder.

In Republic v. Court of Appeals , this Court distinguished a Homestead Patent from a Free Patent, to wit:

Homestead Patent and Free Patent are some of the land patents granted by the government under the Public Land
Act. While similar, they are not exactly the same. A Homestead Patent is one issued to: any citizen of this country;
over the age of 18 years or the head of a family; who is not the owner of more than twenty-four (24) hectares of land
in the Philippines or has not had the benefit of any gratuitous allotment of more than twenty-four (24) hectares of
land since the occupation of the Philippines by the United States. The applicant must show that he has complied with
the residence and cultivation requirements of the law; must have resided continuously for at least one year in the
municipality where the land is situated; and must have cultivated at least one-fifth of the land applied for.

On the other hand, a Free Patent may be issued where the applicant is a natural-born citizen of the Philippines; not
the owner of more than twelve (12) hectares of land; that he has continuously occupied and cultivated, either by
himself or through his predecessors-in-interests, a tract or tracts of agricultural public lands subject to disposition for
at least 30 years prior to the effectivity of Republic Act No. 6940; and that he has paid the real taxes thereon while
the same has not been occupied by any person.
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It bears stressing that a Homestead Patent, once registered under the Land Registration Act, becomes as
indefeasible as a Torrens Title. Verily, Section 103 of P.D. No. 1529 mandates the registration of patents, and such
registration is the operative act to convey the land to the patentee, thus:

Sec. 103. . . . . . The deed, grant, patent or instrument of conveyance from the Government to the grantee shall not
take effect as a conveyance or bind the land but shall operate only as a contract between the Government and the
grantee and as evidence of authority to the Register of Deeds to make registration. It is the act of registration that
shall be the operative act to affect and convey the land, and in all cases under this Decree, registration shall
be made in the office of the Register of Deeds of the province or city where the land lies. The fees for
registration shall be paid by the grantee. After due registration and issuance of the certificate of title, such
land shall be deemed to be registered land to all intents and purposes under this Decree. (Emphasis
supplied)

The Torrens system is not a mode of acquiring titles to lands; it is merely a system of registration of titles to lands.
However, justice and equity demand that the titleholder should not be made to bear the unfavorable effect of the
mistake or negligence of the State's agents, in the absence of proof of his complicity in a fraud or of manifest
damage to third persons. The real purpose of the Torrens system is to quiet title to land and put a stop forever to any
question as to the legality of the title, except claims that were noted in the certificate at the time of the registration or
that may arise subsequent thereto. Otherwise, the integrity of the Torrens system shall forever be sullied by the
ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly performed their
duties.

The general rule that the direct result of a previous void contract cannot be valid will not apply in this case as it will
directly contravene the Torrens system of registration. Where innocent third persons, relying on the correctness of
the certificate of title thus issued, acquire rights over the property, this Court cannot disregard such rights and order
the cancellation of the certificate. The effect of such outright cancellation will be to impair public confidence in the
certificate of title. The sanctity of the Torrens system must be preserved; otherwise, everyone dealing with the
property registered under the system will have to inquire in every instance as to whether the title had been regularly
or irregularly issued, contrary to the evident purpose of the law. Every person dealing with the registered land may
safely rely on the correctness of the certificate of title issued therefor,

and the law will, in no way, oblige him to go behind the certificate to determine the condition of the property.

Respondent's transfer certificate of title, having been derived from the Homestead Patent which was registered
under the Torrens system on May 27, 1966, was thus vested with the habiliments of indefeasibility.

WHEREFORE, the instant Petition is DENIED and the assailed Court of Appeals Decision is AFFIRMED. No costs.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA Associate Justice

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WE CONCUR:

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

RENATO C. CORONA MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

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 AT T E S TAT I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson, Third Division

C E R T I F I CAT I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

SECTION 122. Whenever public lands in the Philippine Islands belonging to the Government of the United States or
to the Government of the Philippine Islands are alienated, granted, or conveyed to persons or to public or private
corporations, the same shall be brought forthwith under the operation of this Act and shall become registered lands.
It shall be the duty of the official issuing the instrument of alienation, grant, or conveyance in behalf of the
Government to cause such instrument, before its delivery to the grantee, to be filed with the register of deeds for the
province where the land lies and to be there registered like other deeds and conveyances, whereupon a certificate
shall be entered as in other cases of registered land, and an owner's duplicate certificate issued to the grantee. The
deed, grant, or instrument of conveyance from the Government to the grantee shall not take effect as a conveyance

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or bind the land, but shall operate as a contract between the Government and the grantee and as evidence of
authority to the clerk or register of deeds to make registration. The act of registration shall be the operative act to
convey and affect the lands, and in all cases under this Act registration shall be made in the office of the register of
deeds for the province where the land lies. The fees for registration shall be paid by the grantee. After due
registration and issue of the certificate and owner's duplicate such land shall be registered land for all purposes
under this Act.

SECTION 103. Certificates of title pursuant to patents. Whenever public land is by the Government alienated,
granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree. It shall
be the duty of the official issuing the instrument of alienation, grant, patent or conveyance in behalf of the
Government to cause such instrument to be filed with the Register of Deeds of the province or city where the land
lies, and to be there registered like other deeds and conveyance, whereupon a certificate of title shall be entered as
in other cases of registered land, and an owner's duplicate issued to the grantee. The deed, grant, patent or
instrument of conveyance from the Government to the grantee shall not take effect as a conveyance or bind the
land, but shall operate only as a contract between the Government and the grantee and as evidence of authority to
the Register of Deeds to make registration. It is the act of registration that shall be the operative act to affect and
convey the land, and in all cases under this Decree, registration shall be made in the office of the Register of Deeds
of the province or city where the land lies. The fees for registration shall be paid by the grantee. After due
registration and issuance of the certificate of title, such land shall be deemed to be registered land to all intents and
purposes under this Decree.

Tan v. Court of Appeals , 421 Phil. 134, 141 (2001).

G.R. No. 133168, March 28, 2006, 485 SCRA 424.

G.R. No. 168661, October 26, 2007, 537 SCRA 513, 530-531.

G.R. No. 80687, April 10, 1989, 171 SCRA 647, 653.

Eastworld Motor Industries Corporation v. Skunac Corporation, G.R. No. 163994, December 16, 2005, 478 SCRA
420, 427-428. (Citations omitted)

Portes, Sr. v. Arcala , G.R. No. 145264, August 30, 2005, 468 SCRA 343, 353, citing Republic of the Phil. v. CA, 3 46
Phil. 637 (1997).

Republic v. Guerrero; supra note 32 at 445.

Republic v. Orfinada, Sr., G.R. No. 141145, November 12, 2004, 442 SCRA 342, 359, citing Heirs of Spouses Benito
Gavino and Juana Euste v. Court of Appeals, 291 SCRA 495, 509 (1998).

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